Question

The graph shows the supply and demand curves for a certain product, which
has a current selling price of $300. The laws of supply and demand most
support which conclusion about the product?
$500
Demand
Supply
$400
Price
$300
$200
$100
1,000 2,000 3,000 4,000 5,000
Quantity
A. The current selling price for the product is too low.
B. The current selling price for the product is too high.
C. The current selling price for the product is the result of a surplus.
D. The current selling price matches the product's equilibrium price.

Answer 1

Answer:

A. The current selling price for the product is too low.

Explanation:

The ideal market price should be $400.  This is the equilibrium point where demand matches supply. At the price of $400, buyers and suppliers will be happy to trade a quantity of 4000 units.

The prevailing price of $300 is too low. Suppliers should raise the price to the price $400 mark.